HSBC counting the cost of Brexit
HSBC Holdings faces as much as US$300 million ($399m) in legal and relocation fees as it prepares to move 1000 staff to Paris, in one of the first indications of the cost of Brexit to the UK’s financial industry.
Europe’s biggest lender took a US$4m charge in the secondquarter for “costs associated with the UK’s exit from the EU”, which chief executive Stuart Gulliver said could rise to between US$200m and US$300m.
HSBC plans to relocate about a fifth of its Londonbased investment bankers to its offices in France to maintain uninterrupted access to the European Union’s single market.
“The total is effectively the cost of the transition across to France,” Gulliver said.
“The revenue we think is at risk from Brexit is about US$1 billion, but we don’t expect to lose it” because moving staff will protect those businesses affected.
London’s financial executives have warned of the dire consequences for jobs and investment of a “cliff-edge” Brexit, in which no mutual free trade deal is struck before the two-year renegotiation period ends.
With little progress made more than a year after the vote, firms such as Morgan Stanley and Citigroup have activated their contingency plans to move or hire hundreds of bankers in expanded hubs inside the EU, with Frankfurt and Dublin the biggest beneficiaries so far.
HSBC shares rose yesterday after it reported a pre-tax profit rise of 5 per cent to US$10.2b for the six months to June 30, with the new buyback of its shares meaning it has returned US$5.5b to shareholders this year.
The boost suggests that a six-year overhaul aimed at cutting costs and boosting profits since Gulliver took charge in 2011 is starting to bear fruit.
“In the past 12 months we have paid more in dividends than any other European or American bank,” Gulliver said, two years after he announced a fresh restructuring that led to sweeping job losses.
Revenue fell 11 per cent to US$26.6b during the period, partly down to the sale of its Brazilian business a year ago.
This is the last set of results before the bank goes through a major management rejig, with chairman Douglas Flint to be replaced in October by the boss of Hong Kongbased insurer AIA, Mark Tucker, who will be responsible for finding a new chief executive to replace Gulliver.
Flint used the bank’s quarterly results to reiterate a warning that the fragmentation of the European banking industry to locations outside London
would lead to increased costs and less financing for countries and corporations.
“Europe must not allow its financial capacity and capabilities to be diminished,” Flint said. There is a question whether “the economies of Europe will continue to have access to at least the same amount of financing capacity and related risk management services, and as readily available and similarly priced, as they have enjoyed with the UK as part of the EU.” London could lose 10,000 banking jobs and 20,000 roles in financial services as clients move €1.8 trillion of assets out of the UK on Brexit, according to thinktank Bruegel.